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Comparing offshoring and backshoring: The role of manufacturing site location factors and their impact on post-relocation performance

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  • Johansson, Malin
  • Olhager, Jan

Abstract

The global nature of businesses has increased the geographical dispersion of operations and has made the location decision an important strategic perspective for manufacturing firms. The consensus view is that three major plant location factors must be kept in mind: (1) access to low-cost manufacturing, (2) proximity to market, and (3) access to development competences. Two options for changing the global manufacturing footprint are offshoring and backshoring. This research has analysed the role and relevance of these manufacturing site location factors as drivers for offshoring and backshoring decisions and has investigated these factors' relationship with operational performance. The study used survey data drawn from Swedish manufacturing plants, including 133 offshoring projects and 99 backshoring projects. The survey instrument used the same set of questions for both relocation directions (for drivers as well as performance benefits), which allowed us to analyse each direction separately as well as to make comparisons between offshoring and backshoring. We applied a theory-testing approach in the study, in that we tested how the three major location factors related to offshoring and backshoring based on confirmatory factor analysis and regression analyses. The results have verified that these three major location factors are relevant for both manufacturing offshoring and backshoring; the results also indicated significant differences in how these factors influence relocation decisions for offshoring and backshoring as well as how they affect performance.

Suggested Citation

  • Johansson, Malin & Olhager, Jan, 2018. "Comparing offshoring and backshoring: The role of manufacturing site location factors and their impact on post-relocation performance," International Journal of Production Economics, Elsevier, vol. 205(C), pages 37-46.
    • Handle: RePEc:eee:proeco:v:205:y:2018:i:c:p:37-46
    DOI: 10.1016/j.ijpe.2018.08.027
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    3. Begoña Fuster & Carmen Martínez-Mora & Adelaida Lillo-Bañuls, 2023. "Does Reshoring Generate Employment? A Study on Services Reshoring and Its Intra- and Inter-Sectoral Components," SAGE Open, , vol. 13(3), pages 21582440231, September.
    4. Woldt, Jason & Godfrey, Michael, 2022. "Is there a home field advantage? The impact of shareholder wealth from U.S. manufacturing location decisions: A comparative analysis," International Journal of Production Economics, Elsevier, vol. 248(C).
    5. Pourya Pourhejazy & Alison Ashby, 2021. "Reshoring Decisions for Adjusting Supply Chains in a Changing World: A Case Study from the Apparel Industry," IJERPH, MDPI, vol. 18(9), pages 1-13, May.
    6. Pinheiro, Alexandra & Sochirca, Elena & Afonso, Oscar & Neves, Pedro Cunha, 2023. "Automation and off(re)shoring: A meta-regression analysis," International Journal of Production Economics, Elsevier, vol. 264(C).
    7. Fuster, Begoña & Lillo-Bañuls, Adelaida & Martínez-Mora, Carmen, 2020. "Reshoring of services and employment," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 233-246.
    8. Godfrey Mugurusi & Luitzen de Boer, 2019. "Are You Receiving Me? A Viable System Model (VSM) Analysis of Purchasing Coordination in a Firm Engaged in Offshoring of Manufacturing Activities," Systemic Practice and Action Research, Springer, vol. 32(3), pages 239-272, June.
    9. Lian-Sheng Tang & Xiang Tan & Peng Guo & Ting-Ting Huang & Tie-Li Liu, 2022. "Comparative Analysis of Locational Factors and Their External Influence on Free-Trade Port Zones in China," Sustainability, MDPI, vol. 14(4), pages 1-19, February.
    10. Morganti, Daniele & De Giovanni, Pietro, 2022. "Offshoring motivations driven by sustainability factors," Research in Transportation Economics, Elsevier, vol. 95(C).
    11. Razika Malek & Qing Yang, 2023. "Analyzing Interrelationships and Prioritizing Performance Indicators in Global Product Development: Application in the Chinese Renewable Energy Sector," Sustainability, MDPI, vol. 15(14), pages 1-26, July.
    12. Kinkel, Steffen & Capestro, Mauro & Di Maria, Eleonora & Bettiol, Marco, 2023. "Artificial intelligence and relocation of production activities: An empirical cross-national study," International Journal of Production Economics, Elsevier, vol. 261(C).
    13. Li, Xinwei & Tse, Ying Kei & Zhang, Minhao & Phi, Hoang Dinh, 2023. "Impact of relocation strategy on brand trustworthiness and word-of-mouth: Experimental vignette research on the US fashion industry," International Journal of Production Economics, Elsevier, vol. 257(C).
    14. Henkel, Malin & Boffelli, Albachiara & Olhager, Jan & Kalchschmidt, Matteo, 2022. "A case survey of offshoring–backshoring cases: The influence of contingency factors," International Journal of Production Economics, Elsevier, vol. 253(C).
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